Mark Holstius Elite    Posts: 744 Joined: 10/11/2012 Location: Sleepy Hollow, IL  User Profile | First, thanks for the many positive responses after my Bash Presentation. I usually expose all the details of anything I’m doing, so I appreciate the support I’ve received after leaving out some details this time. The dynamic nature of this portfolio is particularly intriguing. I hope the concept holds up going forward and benefits all of us. LD & I have had numerous conversations about how portfolios invariably retreat into a DD right after you start trading them live, no matter how extensive your testing might be. His advice is to wait for a DD before you go live. If that’s true, this could be a perfect time to start this one (more details near the end of this post). BTW, if you’re not a Nirvana Club member but would like to see my presentation, I’ve downloaded it along with my slides and they can be accessed in my Dropbox folder using these links; Slides: https://www.dropbox.com/s/odtfos847xo7eaf/Bash_2017_Mark_Holstius_Slides.pdf?dl=0 Video (45 minutes): https://www.dropbox.com/s/k6cc0ppvsiacbpz/Bash_2017_Mark_Follow_The_Money_Video.mp4?dl=0 I can’t overstate the value of the Nirvana Club for me over the years - it was one of the best investments I’ve ever made. There were several great presentations at the Bash and a wealth of information shared during breaks - all of which influenced some of changes I’ve made to the portfolio this past week. My Process Daily Selection Of Liquid Stocks My core theory with this portfolio is that large Institutions appear to place short term trades using algorithms similar to Nirvana’s RTM strategies. With that in mind, I use 5 Dynamic Lists to select highly liquid stocks on a daily basis that are exhibiting characteristics correlated with the following 5 indexes; Dow SP500 Small Cap Financials Energy Stocks are selected from a list of 4,300 Optionable stocks and have to meet these minimum requirements; 10 Day Avg Close >= $5 10 Day Avg Money Flow >= $50 Million I use money flow (vs # shares) in the dynamic lists because it “normalizes” the activity of different priced stocks. By using a minimum of $50M money flow, the # of shares required is based on the stock’s price; With a $5 stock, that minimum equates to 10M shares, and with a $200 stock that minimum equates to 250,000 shares. If we use the OV Account Settings to set the Min # Shares to 1M; A $5 stock will need $5M traded, and a $200 stock will require $200M traded (which may eliminate high priced stocks from consideration) The formula I use in my dynamic lists also adjusts the $50M minimum by year; Avg(C,10)*Avg(V,10)>=(BarYear()-1967)*1000000 This roughly adjusts for inflation, scaling back the Money Flow requirement in the past; 2002: $35M 2007: $40M 2012: $45M 2017: $50M Weekly Selection Of Strategies The portfolio only utilizes RTM Strategies, and I added Nirvana’s excellent CTX1 & XLS2 RTMs to the mix after the Bash to achieve more diversification in the selection of trades. I choose to use 25 of 40 RTM-List pairs for trading. Since there are ~ 40 Billion possible sets of 25 starting with a group of 40, if I pick just 1 set of 25 pairs I’d be curve fitting to the data. Instead, I feed all 40 pairs to Portfolio Wizard and have it select a set of 25 each week based on the previous year’s performance. Over the past 15 years, Portfolio Wizard produced over 500 unique sets. In about 50% of the weeks, the set changed week to week, with the rest of the weeks showing a repetition from 2-7 weeks in a row. The Results Development period: 1/1/07 thru 1/1/16 Dynamic selection of stocks each day, dynamic selection of strategies each week - a walk forward. The choice of trade size is adjustable. These charts use 4% of equity trades, but include results using 2% in the strip at the top. Margin 1 year Margin 5 Years Margin 15 Years IRA 1 Year IRA 5 Years IRA 15 Years Margin Statistics; The following tables of statistics are sections of my large analysis spreadsheet. Files showing my full spreadsheet page for both Margin & IRA are attached and can be viewed / downloaded below this post; “001 Spreadsheet_Margin_4_Percent “ “001 Spreadsheet_IRA_4_Percent “ Interesting points; Portfolio is in a DD condition over 60% of the days ~80% of DDs last < 10 days ~90% of DDs < 5% There were only 2 days in the past 15 years when it experienced a DD > 15% The portfolio is currently about 7 days into a DD and down about 4%. As LD says, it’s much better to begin trading a system during a DD. Since the current DD fits the statistics for about 90% of the previous DDs, this may be a perfect time to start. Whether during a DD or not, ~75% of days are flat or higher than the day before, and about ~25% of days are lower than the day before. IRA Statistics; Market Events / Black Swans I didn’t try to develop a portfolio that avoided market DD events. The portfolio is affected by them, but has consistently recovered in the past; Advanced OV Analytics Steve Mayo’s new Advanced OV Analytics capability is extremely useful - and the full results of his analysis of the margin portfolio is available in the file “001 Advanced OV Analytics” attached to this post below. Here are a few of the pertinent charts from his Analytics tool; Steve shared with me that the portfolio appears to have a “normal” range of volatility - which implies that it hasn’t been overly optimized / curve fit. At the same time, the rolling monthly returns reflect the positive bias (Alpha) of the portfolio. Steve’s Monte Carlo analysis and Box Plots appear to support the potential for consistent returns in the future. It’s an obvious plug, but Steve’s Advanced OV Analytics tool is just amazing. It’s incredibly powerful and so convenient & easy to use now that it’s attached to OV. It makes it easy to analyze & compare any Account or Portfolio just by clicking on the "Omnivesting" link on various locations; Thanks for a great addition to OV, Steve! Account Settings There are a minimal number of Account settings. The “Max Strategies” of 5 allows a range of allocations for a symbol. My assumption is that if a stock is triggered by more than one list or RTM, it deserves a higher allocation. Using 4% of equity / trade, a stock could use from 4% to 20% of Equity. Portfolio Trade Multiplier Settings It’s quite simple to change between 2%, 4%, or whatever allocation you like dependent on your outlook for the market. Simply adjust the “Trade Multiplier” value for the portfolio; Review The portfolio was developed to lower risk through diversification; 1) Numerous small trades 2) A mixture of highly liquid stocks (no ETFs) 3) Long only trades (no risk of inability to borrow stock) 4) An assortment of RTMs 5) A variety of Indexes used in the selection process 6) Variable allocation (up to 5 trades in the same symbol: 4%-20% trade size possible) And most important; 7) Stocks are selected dynamically on a Daily basis 8) Strategies are selected dynamically on a Weekly basis As always, there’s no guarantee of future performance - but I feel this portfolio is promising for a number of reasons. 1) All the results shown are a walk forward utilizing daily stock selection and weekly strategy selection. 2) The period 1/1/07 thru 1/1/16 was used for any development decisions (# of strategies, etc.). The periods before and after were never seen by the processes. 3) Trades are Long only and all the stocks are liquid. Fills shouldn’t be a problem, and there’s no uncertainty about whether the stock can be borrowed for shorting. 4) Small trade size alleviates the pain of having a single, large position in a drawdown. 5) Market State is not a consideration in either the Dynamic Lists or the Portfolio Wizard. 6) I haven’t attempted to avoid Market Events or Black Swans - and the portfolio has recovered well in the past. I’m trading this in both an IRA and Margin account, using IB and Gar Wood. With the data I’ve seen so far, I don’t plan to interfere with it going forward unless something drastic happens. I’ll try to extract and share even more information on what I feel is “normal behavior” based on the data now that I’ve expanded my ability to refine the DD statistics. This portfolio is posted now in Elite trader as “Follow The Money Rev02” Thanks for reading - and good luck in your trading! Mark [Edited by Mark Holstius on 6/16/2017 3:39 PM]  Attached file : 01_Money_Flow_Chart.png (393KB - 1578 downloads) Attached file : 02 1 Year Margin.png (101KB - 1584 downloads) Attached file : 03 5 Year Margin.png (112KB - 1568 downloads) Attached file : 04 15 Year Margin.png (106KB - 1557 downloads) Attached file : 05 1 Year IRA.png (98KB - 1571 downloads) Attached file : 06 5 Year IRA.png (108KB - 1594 downloads) Attached file : 07 15 Year IRA.png (108KB - 1553 downloads) Attached file : 08 Margin Statistics.png (210KB - 1534 downloads) Attached file : 09 IRA Statistics.png (206KB - 1595 downloads) Attached file : 10 Black Swan Events.png (160KB - 1548 downloads) Attached file : 11 OV Analytics Volatility.png (221KB - 1587 downloads) Attached file : 12 OV Analytics Monte Carlo.png (76KB - 1587 downloads) Attached file : 14_Account_Settings.png (135KB - 1556 downloads) Attached file : 15 Margin Allocation.png (101KB - 1562 downloads) Attached file : 16 IRA Allocation.png (100KB - 1540 downloads) Attached file : 001 Spreadsheet_IRA_4_Percent.png (896KB - 256 downloads) Attached file : 001 Spreadsheet_Margin_4_Percent.png (902KB - 246 downloads) Attached file : 001 Advanced OV Analytics.png (1015KB - 266 downloads) Attached file : 13 OV Analytics.png (106KB - 1496 downloads) |
